Sri Lanka bond gazette controversy deepens

A controversy over a gazette notice relating to Sri Lanka’s bond auctions deepened with ex-President Mahinda Rajapaksa alleging ‘diabolical’ attempt to shift blame over bonds frauds in 2015 and the current administration saying it wrongly legitimized privately placed bonds in earlier years.

A source familiar with the bond market said the gazette is a routine legal procedure. But it now become a political hot potato because the government changed in 2015 with the ministers of finance changing, while the bond sales also turned controversial.

The Daily Mirror newspaper quoted a finance ministry statement as saying the procedure had been abused during the last regime to give legal effect to private placements made outside the auctions and it was a ‘hidden attempt’ to comply with the law.

Ex-President Mahinda Rajapaksa, who was finance minister until January 08, 2015 is threatening to sue the Central Bank over the gazette.

Though the gazette notice issued by the Central Bank is dated January 01, 2015, Rajapaksa, who was finance minister until January 08, 2015, says it has been published ‘long after that date’ and he did not sign it.

“The small print on the Sinhala version of the Gazette seems to indicate that it was actually printed only in November 2016,” he said in a statement.

“Therefore, I see this as a diabolical attempt to mislead the public and palm off the yahapalana government’s crooked bond issues on me and my government. I will be taking legal action in this regard.”

Similar gazettes have also been issued in earlier years, and relates to a procedure that has to be carried out under Sri Lanka’s Registered Stocks and Securities Ordinance, originally enacted in 1937.

At the time, so-called ‘rupee securities’ were issued at fixed and could not be readily traded. But from the 1990s bonds were sold under auction at yields determined by the market.

A person familiar with bond market operations say it became the practice to issue a backdated gazette at the end of the year, to comply with the requirement of the rupee securities law (amended later), under which market determined bond were issued.

A similar gazette was issued for 2014, dated January 29, which was ‘reserved’ for the central bank beforehand by the government printer. A January 01, 2016 and a January 01, 2017 gazette had been reserved for the last two years.

The Government Gazette is a newspaper started during British rule to announce ordinances, laws and government decisions to the public in much the same way as ‘ana bera’ was used during the time of Sri Lankan monarchs.

All bond auction notices and the results are also announced in newspapers by the central bank.